Zostel v Oyo: Supreme Court appoints arbitrator in case

Last month, the Supreme Court appointed an arbitrator in a case between hospitality companies Zostel and Oyo Rooms. The arbitrator, former Chief Justice of India AM Ahmadi, will decide the question of whether the arbitration agreement signed between the two companies stands. If it does, the companies will have to fight out their disputes in a private arbitration setting as opposed to open court.

Both companies have been embroiled in a legal war across multiple courts, ranging from issues like data theft to acting in bad faith. The dispute started after merger talks between Zostel and Oyo broke down. Oyo said that Zostel had misled it on revenue, while Zostel claims that, among other things, Oyo stole a trove of data while auditing it.

Oyo and Zo’s statements

Oyo said in a statement:

After Delhi High Court and Gurgaon Court adjudicating the case filed by Zostel in favour of OYO, Supreme Court appoints an arbitrator.

Supreme Court also observes that merely because the Court is appointing arbitrator does not mean that the Court is accepting that the disputes or the claims raised by Zostel are arbitrable.

For more than a year, OYO has been continuously inconvenienced, pressurized and harassed by Zostel and its directors. In January this year, OYO filed a criminal complaint against the founders of Zostel, under Section 405, 406, 415, 420, 425 and 426 pertaining to Criminal Breach of Trust, Cheating, and Misrepresentation of data. Prior to this, OYO had also filed other criminal cases under section 379, 414, 420 and 120B of IPC and other implications under IT and Copyright Acts with the Economic Offences Wing & Cybercrime department against senior employees of Zostel for stealing data and other assets including laptops which continue to be under Zostel’s access even now and is being used to its benefit.
As a response to this Zostel unsuccessfully approached Gurgaon District Court and the Delhi High Court, where their frivolous and baseless claims were adjudicated, in the favor of OYO. We are pleased to share that the Hon’ble Supreme Court has now appointed an arbitrator in this case, setting the stage for the closure of this matter where OYO is prepared fully to defend these baseless claims.

We welcome, respect and value the Hon’ble Supreme Court’s decision to appoint an arbitrator while giving OYO the opportunity to agitate the issue of arbitrability. As a per of order, the Court has also expressly observed that merely because the Court is appointing arbitrator does not mean that the Court is accepting that the disputes or the claims raised by Zostel are arbitrable. Please note, the arbitration proceedings will not have any bearing on the other suits that have been filed by OYO against Zostel. We are confident that as in the past we will be able to defend our position before the honorable arbitrator successfully and prove that these claims are unfounded.

Zostel’s statement, per Moneycontrol:

Zo is extremely relieved to finally get a forum to present all facts and data related the entire business transfer of Zo (its employees, properties, bookings, IP and data) to Oyo with honorable SC allowing our petition for arbitration. Also, for what was touted as a non-binding term sheet under the garb of which Oyo had been resiling from the promised contractual terms, the honorable Supreme Court bench has observed in its judgment that a binding arbitration clause exists between the two parties as per the term sheet post which the entire business transfer of Zo took place.

We welcome the appointment of Honorable Ex-Chief Justice of India Justice AM Ahmadi and look forward to opening the huge data room of facts and evidences supporting the business transfer and our claims. We strongly believe in Justice Ahmadi’s most sought after guidance and experience in arbitration matters. Justice will prevail and the aggrieved will get its dues – no matter how many frivolous cases and other harassment tactics are used to muzzle our voice.

And at that time Zo Rooms had called OYO’s decision to terminate acquisition done in ‘bad faith‘.

In February, Zostel and Oyo filed cases and complaints against each other in a Gurugram court, a dispute that would later end up in front of the Supreme Court.

Before all this, in April 2015, the Delhi High Court issued a stay order against Zostel, based on an alleged copyright material theft complaint filed by OYO Rooms. OYO Rooms alleged then that Zostel’s launched hyperlocal hotel rooms booking platform Zo Rooms is based on data copied from them. Apparently, OYO Rooms produced emails and CCTV footage to claim that some of its employees stole proprietary software from the company, and left to join Zostel.